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June 12, 2008

The logic of the gas tax

With gas prices so high, drivers are looking for any way to reduce the pain at the pump. Some have focused on reducing gas taxes levied by the state and federal governments. But what is the rationale behind having a gas tax in the first place? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"North Carolina has had a gas tax since 1921. We were one of the earliest states to have such a tax. The logic is that a gas tax is what economists call a user fee. Obviously, when we drive our vehicles on a road, we benefit from that. It gets us from point 'a' to 'b,' or it moves products and services from point 'a' to 'b.' And so drivers benefit, and it makes sense, therefore, for drivers who benefit to pay for those roads. And one of the easiest ways to do that - it was figured out a long time ago - was simply to tax the fuel that all of us have to use when we drive. So that is really the logic behind the gas tax. The more you drive, the more fuel you use, the more you use the roads, therefore, the more you pay. But this has created, actually, some issues today. One is fuel efficiency. People are getting better fuel efficiency - which we want to encourage - are using more of the roads, but they are paying relatively less because they are getting more miles per gallon. That's an issue. Another issue would be cars that use alternative fuels - where they don't pay, they don't use gas - they are not going to pay as much of a gas tax. So that's an issue. So today people and economists and decision makers are perhaps looking at alternative ways to fund roads, maybe generally from general tax funds, or maybe from something like a mileage tax. All of this, of course, is in the thinking stage. People should stay tuned, but we may have a big change in the future in how we pay for roads."

Posted by Dave at June 12, 2008 08:11 AM